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In the past decade, the possible influence of the Dassonville / Cassis de Dijon doctrine of the (Fundamental) Freedoms of the European Community1 on intra-Community choice-of-law questions has been a favorite, and fiercely debated, topic among European choice-of-law scholars. The Dassonville / Cassis de Dijon doctrine of the Freedoms doctrine forbids, roughly speaking, all undue burdens on intra-Community trade.2 This requirement, some say, demands that absent special justification for applying the law of the importing state, the law of the home state of a product or service has to be, and can be, applied to everything from product specification to unfair competition and even the contract law under which the product or service is sold to consumers.3 Others contend that as between the laws of the importing and of the home state, the law more favorable to the supplier has to be applied, barring special justification for applying the stricter law.4 The practical effect of these theses depends largely on how generously one admits justifications. So far, the debate has been inconclusive, with positions ranging from a complete denial of such possible influence5, to a complete overhaul of present choice-of-law rules, or at least present choice-of-law doctrine.6 There is no jurisprudence of the ECJ to date.7
The US has almost 200 years of constitutional experience with a Dormant Commerce Clause, which operates very much like the Freedoms8. In particular, the US has over 200 years of experience with a federal, i.e., fragmented, legal system to which the Dormant Commerce Clause is juxtaposed. One might thus expect to find ready solutions to the European questions in US jurisprudence and legal scholarship. But, to the disappointment of the comparativist, the search for such solutions in the US case reports and law reviews is to a large extent fruitless.9 True, two US Supreme Court decisions, Edgar v. MITE Corp. (1982)10 and CTS Corp. v. Dynamics Corp. of America (1987)11, touch the issue. They are widely understood as constitutionally endorsing the internal affairs doctrine (which holds that the internal affairs of a corporation are to be governed by the laws of the chartering state).12 But these two decisions do not advance a ready theory, and are perhaps not even consistent with one another, as we will see later. There is, however, a vast jurisprudence and scholarship on general questions of federalism and choice-of-law, centering around the Full Faith and Credit Clause, the Privileges and Immunities Clause, and Due Process.
This paper will draw upon, and expand on, these two strings of literature to develop some elements of a general framework for choice-of-law in a federal system and an internal market. This framework contains two elements:
The first element is the criteria that should guide us in forging a choice-of-law rule. The aforementioned European literature merits praise for bringing more pragmatism into the European choice-of-law discussion. In analyzing particular choice-of-law rules, this literature has addressed the private interests involved in choice-of-law in more realist terms than most prior European choice-of-law scholarship. This is a highly welcome development that this paper will try to push even further, most of all by questionning the simplifying assumptions that have been made by the European authors. However, the European literature largely ignores the state interests involved, i.e., the horizontal power distribution of the federal system. This is an important element extensively addressed by the US literature.
The second element is the authority to make choice-of-law rules. In a federal system, this authority should be exclusively the Union's. It should ideally be vested in the federal legislator, otherwise possibly in the federal courts. The control of state choice-of-law rules under the Freedoms as advocated by the European authors seems to be a third-best substitute for the (supposedly) missing European parallel of the federal power in choice-of-law matters provided for by the US Constitution. If one does not make unwarranted simplifying assumptions, the task of controlling state choice-of-law rules under the Freedoms (or, for that matter, the Dormant Commerce Clause) is just not feasible for the federal court(s). Or, to be more precise, it is not worth the time - if the federal courts engaged in forging their own federal choice-of-law rules, the complexities would be similar, but the benefit much greater, such that the same margin of error would be less of a problem. In Europe, however, it seems impossible that the ECJ, with at most the Court of First Instance to support it, could devise a new set of European choice-of-law rules. The ECJ should therefore simply abstain from controlling non-discriminatory state choice-of-law rules. If a more far-reaching control were a result of a straightforward application of Freedoms doctrine, this would just be one more reason to reconsider that doctrine. It is good instinct to think that the Union should get involved in choice-of-law - but the ECJ is not the right organ of the Union for the task, least of all under standard Dassonville / Cassis de Dijon doctrine.
The first step in developing this framework will have to be some short remarks on the disputed basics of choice-of-law to position this paper in the larger methodological discussion (II.). Non-discrimination will be dealt with briefly in these methodological remarks - however important non-discrimination is for an internal market, this paper is mainly concerned with what goes beyond non-discrimination. The preliminary methodological remarks on choice-of-law will also set the stage for the first major part of the paper, general considerations on what choice-of-law should look like in a federal system (III.). Here, I will try to show that a federalistic state should vest the authority to make choice-of-law rules in the union (III.A.). I will also try to expand on the preliminary methodological remarks as to what considerations should guide the creation of such rules, although my findings will be rather unspecific and very fragile. Incidentally, my findings seem to vindicate the position that state interests matter in choice-of-law (III.B.). I do think, though, that quite a clear case can be made against substantive bias in interstate choice-of-law (III.C.). I will then briefly explore if, and to what extent, the current state of the law in the US and the EU conforms to what I found choice-of-law should be in a federal system. The results are mixed (IV.). With this federalistic background established, both in the abstract and in positive law, I will try to ascertain what the concept of the internal market can add to choice-of-law in a federal system. To this purpose, I will first need to make some general remarks on federalism and the internal market (V.). Most importantly, I will attend to the doctrinal uncertainties, and complex policy considerations, surrounding the Dassonville / Cassis de Dijon test (and its American counterpart, the Pike test) (V.B.). On a narrower view of this test, most choice-of-law rules would be outside the test's scope. I will show into what complicated problems a broader view of the test would lead with respect to choice-of-law rules, and argue that in view of these complexities, even if one were generally to retain the broader view, one should make an exception for choice-of-law (VI.D.). I will also analyze other approaches that have been proposed under the Dormant Commerce Clause (VI.B., C., D.3.). Only one of these approaches, founded on territoriality considerations, makes sense on a theoretical level, though. Even here, the practical impact should be minimal (VI.D.3.). Section VII concludes.
A reader of this paper might complain that except for some minor details, this paper is doing nothing but recasting in new language, and perhaps under the pressure of some controlling norm like the Freedoms or the Commerce Clause, centuries-old choice-of-law policy arguments. Indeed, this is true, and the same can be said about the "new" European literature discussing choice-of-law and the Freedoms. I would have two replies to this complaint. One, the complaint is one more argument why one would think that the whole discussion is nothing a federal court should bother about, unless it goes so far as to create its own federal choice-of-law rules. Two, I have a faint hope that the rearrangement of the centuries-old arguments in this paper is sufficiently informative as to make the paper worth reading.
The focus of this paper is conceptual rather than positivistic. It is comparative only to the extent that different ideas are taken from courts and scholars from different legal systems. On many points, this paper will be extremely cursory. Most importantly, it will often simply ignore many fine differences between US and European concepts - this paper is concerned with a rough systematic outline, and it is hoped that none of said small differences will be relevant for this purpose. Naturally, none of the propositions in this paper should be understood as what the law "is". They are merely recommendations as to what sensible courts and judges might want to make of it. Even as such recommendations, they should be taken with great caution. The subject is extremely complex, and greater minds have not been able to give clear contours to it, yet alone in a short paper like this. This paper is merely a first approach, an idea on how one might want to think about the issues covered.
1 The Freedoms are the free movement of goods (Art. 28, 29 EC), the freedom of movement for workers (Art. 39), the right of establishment (Art. 43), the freedom to provide services (Art. 49), and the free movement of capitals (and payments) (Art. 56).
2 See infra V.B, p. 24 for more details.
3 See, e.g., Jürgen Basedow, Der kollisionsrechtliche Gehalt der Produktfreiheiten im europäischen Binnenmarkt: favor offerentis, RabelsZ [Rabels Zeitschrift für ausländisches und internationales Privatrecht] 59 (1995) 1; Wolfgang Drasch, Das Herkunftslandprinzip im IPR (1997); Luca G. Radicati di Brozolo, L'influence sur les conflits de lois des principes de droit communautaire en matière de liberté de circulation, Revue Critique de Droit International Privé 82 (1993) 401; cf. Marc Fallon, Les Conflits de Lois et de Juridictions dans un Espace Économique Intégré - L'Expérience de la Communauté Européenne, 255 R.C.A.D.I. 9, 140-149 (1995-III).
4 See, e.g., Peter von Wilmowsky, Europäisches Kreditsicherungsrecht (1996), the main part of which (§ 2 II) is reprinted almost verbatim as Peter von Wilmowsky, EG-Vertrag und kollisionsrechtliche Rechtswahlfreiheit, RabelsZ 62, 1 (1998).
5 See, e.g., Christian Armbrüster, Ein Schuldvertragsrecht für Europa?, RabelsZ 60 (1996) 72, 74-79; Rudolf Gärtner, EG-Versicherungsbinnenmarkt und Versicherungsvertragsrecht, EWS [Europäisches Wirtschafts- und Steuerrecht] 1994, 114; Christian Kohler, La Cour de Justice des Communautés Européennes et le Droit International Privé, Droit International Privé 1993-1994, 71, 75-77.
6 See, e.g., von Wilmowsky (supra note 4).
7 The only ECJ decision touching the issue is Case C-339/89, Alsthom Atlantique v. Sulzer, 1991 E.C.R. I-107, where the ECJ held, dicta, that a mandatory rule of French contract law could not have been an undue burden in any event because the parties had had the possibility to elect another state's law to govern their contract. In addition, the ECJ has rendered two decisions related to (!) corporate choice-of-law under Art. 43, 48 EC, Case 81/87, The Queen v. Treasury and Commissioners of Inland Revenue, ex parte Daily Mail and General Trust PLC, 1988 E.C.R. 5483, and Case C-212/97, Centros Ltd ./. Erhvervs-og Selskabsstyrelsen, 1999 E.C.R. I-1459, but the area of corporate law is special in the ECJ's eyes for reasons we will come back to in section V.B.4, p. 29. Also, what was at issue in Daily Mail was the (easily justifiable) substantive rule that a corporation may be threatened upon "emigration" for tax collection purposes, not a choice-of-law rule, see Wulf-Henning Roth, Die Freiheiten des EG-Vertrages und das nationale Privatrecht, Zeitschrift fÜr Europäisches Privatrecht [ZEuP] 1994, 5, 18-21. The issue of Freedoms and choice-of-law might now begin to make its entrance into the national (the German ?) courts, cf., e.g., OLG Hamburg [Court of Appeals for Hamburg], Archiv für Presserecht [AfP] 1999, 643 (644-645) (F.R.G.).
8 For similarities and differences generally see Donald Kommers & Michael Waelbroeck, Legal Integration and the Free Movement of Goods: The American and European Experience, in Integration Through Law, Europe and the American Federal Experience, vol. 1, bk. 3, 165 (Mauro Cappelletti, Monica Seccombe & Joseph Weiler eds., 1986); Wulf-Henning Roth, Freier Warenverkehr und Staatliche Regelungsgewalt in einem Gemeinsamen Markt: Europäische Probleme und Amerikanische Erfahrungen (1977).
9 Cf. Martin Schulz, Verfassungsrechtliche Vorgaben fuer das Kollisionsrecht in einem Gemeinsamen Markt [Constitutional Requirements for Choice-of-Law in a Common Market] (2000).
10 457 U.S. 624.
11 481 U.S. 69.
12 See, e.g., Paul N. Cox, The Constitutional "Dynamics" of the Internal Affairs Rule - A Comment on CTS Corporation, 13 J. Corp. L. 317, 345-356 (1987); William M. Richman & William M. Reynolds, Understanding Choice of Law (2nd ed. 1993) § 96(a); but see Richard M. Buxbaum, The Threatened Constitutionalization of the Internal Affairs Doctrine in Corporation Law, 75 Cal. L. Rev. 29, 35, 53-54 (1987), and P. John Kozyris, Some Observations on State Regulation of Multistate Takeovers - Controlling Choice of Law Through the Commerce Clause, 14 Del. J. Corp. L. 499, 511 (1989).